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Pre-budget proposals - 1992-93.

Members of Management Association of Pakistan (MAP) have submitted Pre-Budget proposals for the forthcoming Federal Budget 1992-93.. Following is the summary:

ABM Data Systems

(Private) Limited

- Sales Tax should be eliminated from various types of low-end personal computers i.e XT, AT, based on Intel 8086, 8088, 80286 or equivalent processors, which are already duty free.

- Import Duty and Sales Tax should be eliminated from spares for computers and related peripherals. Moreover, reimport of these Rems should also be free from any additional charge when they are sent abroad for repairs.

- Sales Tax on all types of computers software and storage media (such as diskettes, tapes and cartridges) should be eliminated.

- Import Duty and Sales Tax on the following items should be eliminated. a) Accessories and consumables for

computers and related peripherals. b) Power conditioning equipment such

as stabilizers, UPS (Uninterrupted

Power Supply) and Surge protectors. c) Data communications equipment such

as Gateways, Bridges, Routers,

Modems, Multiplexers, Fax cards and

Telex cards. d) Optical storage devices such as CD-ROMS,

WORMS and read/write optical


Agriauto Industries Limited

- Custom levies on the import of following items should be eliminated: a) component parts (25% under SRO

600(1)/83and 15% under SRO 0602(1)/

83both datedjune 11, 1983)imported

under approved deletion programme

by Ministry of Industries for making

sub-assemblies supplied to vehicle and

tractor manufacturers; and b) raw material of automotive and tractor

parts ivhich is Ca-) 15%.

- 12.5% Sales Tax on vehicle and tractor parts, which are supplied as replacement parts to the spare parts market should be eliminated.

- Transit trade of vehicle parts to Afghanistan should be restricted.

- LMM facility should be provided to vendors manufacturing parts for OEMS.

- Following rates are recommended for import duties for various items:
 - CBU 60%
 - CKD 30%

- Components (vendor) 10%

- Raw material zero

Allwin Engineering

Industries Limited

1. The existing and proposed Custom tariff on vehicles and materials are:
 Existing All
 Trucks Buses Vehicles
CBU 35 20 60
CKD 5 5 30

Vendors: a) Raw materials 0 0 0 b) Components (for use in assemblies for OEMS) 25 25 10

Following are the problems:

- Only a 5 per cent differential exists between raw materials and CKD-not enough to be competitive

- In case of components, a fiscal anomaly-exists - vendor pays 25 per cent, assemblers 5 per cent. This needs to be rectified.

- Vendors who use local materials as pig iron and steel sheets, buy materials at continually increasing prices whilst levy on imported CKD kit is decreasing. This is anomalous and affects their competitiveness.

In order to solve these problems, it is suggested that same degree of competitiveness between vendors and CKD as is between CKD and CBU, viz 30 per cent be allowed. This alone will enable the vendors using local materials to live in harmony.

- Custom levy should be exempt on materials imported for manufacture of parts for the replacement market.

- Sales tax on finished goods should be eliminated.

- Rough Aluminium Castings of pistons should be classified under PCT heading 8409.9110 or 8409.9910 instead of 7616.9010.

Following steps should be taken to avoid underinvoicing and misdeclaration of auto parts by importers and to realistically determine the ITP'S of auto parts: a) Independent agencies should be hired

for certifying the value of auto parts

(falling under PCT 8409.9110,

8409.9910,84.84,87.08 and 87.14) for

a period of atleast two years. b) Weight and quality should be mentioned

on the invoice and packing list of

imported auto parts. c) Local manufacturers cost should also

be considered as en evidence for ITP


- The period of completion of survey undertaken by CBR to determine input/ output ratios and the quantity to be produced, should be made mandatory to be one month from the date of request, for the issuance of Material Consumption Certificate, also the restriction of quantity to be produced may be removed so that any quantity of goods may be produced.

- Submission of indemnity bond should be allowed to the manufacturers of auto and agricultural tractor parts as it is allowed to the assemblers of automotive vehicles. Further the word importation should be defined as "taking the delivery of goods for home consumption."

- Warehousing period for the material imported and warehoused by engineering industry may be relaxed to 12 months.

Atlas Group of Companies

- The punitive measures for indigenisation have not succeeded. With deregulation of our policy it will become even more difficult. Incentives must thus substitute the punitive measures. A 2.5 per cent exemption from income tax for every unit of 10 percent of deletion may serve the purpose well. It will not only indigenise local industry but will also create employment, save foreign exchange and in due course earn foreign exchange through exports of real value added.

- It is recommended that since the Automotive Vendor Industry is classified as capital goods industry for custom purposes, it may be treated as such for financing as well as capital made available to it under LMM scheme for local manufacture. In order to encourage export, export finance, export rebate of 20 per cent and exemption of income from income tax as in case of other industries may also be allowed to Auto industry.

- Turnover tax @ 0.5 percent should be withdrawn from the engineering industry.

- Whenever income tax refunds are due, 50 per cent of refunds should be made immediately on the filling of return and remaining 50 per cent with the assessment order at the time of raising of demand.

- Automotive parts should be subject to a uniform treatment regarding the levy of sales tax, import surcharge and lqra, whether they are sold to the Original Equipment Manufacturers or in the commercial market. This step will avoid smuggling and under-invoicing leading to increase in Government revenues.

- Transit trade facility to Afghanistan should be removed in respect of automotive parts.

- Competitive advantage to the vendor industry and surcharge on imported tractor parts should be reimposed, both of which were withdrawn.

- Sales tax, Iqra and surcharge should be exempted on motorcycles and scooters.


(Pakistan) Limited

- Frequent changes in tax laws, tax structures and assessment procedures should be discouraged. Fiscal policies should be for a minimum period of 3 years.

- Head office expenses should be allowed in full as upto the assessment year 1981-82 and it should not apply to those foreign companies which are covered under the Tax Treaties.

- Approved Provident, Gratuity and Pension funds should be allowed to invest in Special Saving Certificates and Defence Saving Certificates for the benefit of employees from these funds.

Compensation on advance payment of tax should be increased from 6 per cent to 10 percent, and it should also be allowed on taxes deducted at source.

- ITOs should call for the information from the income Tax Officer, Survey and Collation and notices under section 144 to assessees be discouraged. Otherwise Section 144 of the income Tax Ordinance should only be operated by ITOs after obtaining permission from the CIT to issue notice to the assessee for submission of information.

- High taxation rates of 55 per cent for foreign private limited companies should be reduced to encourage foreign investment and brought in line with other developing countries such as Thailand, Malaysia, Philippines and Indonesia where it is 35 per cent.

The rate of income tax should be uniform for private and public limited companies.

- Necessary SRO should be issued to entitle recognised Provident and Gratuity funds to receive payment of dividends, interest and profits payable to these funds without deduction of tax at source.


Industries Ltd.

- Value Added Tax (VAT) should be introduced to gradually replace the present sales tax.

- Interest income should be exempt upto a specified limit, irrespective of its source.

- Tax structure of company taxation should be simplified by consolidating different taxes. Rates of company taxation should also be reduced.

- Income Tax should be levied on agricultural income.

- Exemptions under income Tax law should be eliminated and maximum marginal rate should be 40 per cent.

- Self-assessment Scheme should be introduced whereby if the annual income of an assessee increases by at least 20 per cent, then he should be exempted from detailed tax scrutiny.

- Capacity taxation should be introduced for indirect taxes, such as excise duties, in case of manufacturing units.

- Specific excise duties should be indexed to maintain their ad-valorem rates over time.

- Adequate data base should be built up for proper enforcement of tax laws, and capacity developed to analyze the data. Institutional arrangements should be made for monitoring economic activity and collecting data from all relevant agencies, as these are crucial for the proper enforcement of tax laws.

IBM - World Trade Corporation

- The computer parts (custom classification 8473.3000) should be exempted from duties and sales tax.

- Sales Tax on XT and AT personal computers or their equivalent should be eliminated.

- Sales Tax should be eliminated on magnetic media used for computers e.g. magnetic tapes, diskettes, etc.

- Statutory tax rates for banks and private limited companies should be brought down to 55 per cent and 45 percent respectively.

- Rates for deduction of tax at source should be similar for resident companies and those non-resident companies which have a permanent establishment in Pakistan and which have been regularly assessed for the preceding ten years.

- The 25 percent limit of Form |L' should be revised due to increased financial and working capital requirements.

- Full Head Office expenditure should be allowed as done upto assessment year 1981-82. Further, this rule should not apply to those companies which are covered under the tax treaties.

- Private companies and Retirement Benefit Funds should be allowed to invest in Defence Saving Certificates and Special Saving Cartificates.

International industries Limited

- Turnover tax should not be levied on those listed companies which have incurred losses during the year as per their audited accounts.

- Loans should be provided to construction industry on the conditions at par with the other industries of the company.

- Financial sector should be allowed to provide loans to the first time home buyers against the mortgage of property.

- The ceiling on Director's remuneration for Private Limited Companies should be withdrawn. In case, if it is not possible, the limit should be increased from Rs. 30,000 per month to Rs. 50,000 per month, excluding perquisites.

- All indirect taxes like sales tax and excise duty should be waived from the down stream steel industry and imposed at the Pakistan Steel Mills at the import stage.

- All exemptions should be abolished and all types of incomes should be brought under the tax net. The maximum tax rates should be 40 per cent for Private Limited Companies; 30 per cent for Public Limited companies and individuals. The limits of personal exemptions for individuals should be raised to Rs. 50,000.

A secondary market for TFC'S or debentures on the Stock Exchange should be established to give a suitable alternative to the corporate sector for raising debt capital at low interest rates, as compared to high rates offered by banks and financial institutions.

- Surcharge to be levied on large families to restrict increase in population of the country.

Mansoor Ahmed

Khan & Co.

- Pension Scheme should be introduced with the help of banks/investment companies, in which the built-up deposits and the |pension' payments of/to individuals be recognised as |Pension Scheme' within the meaning of Income Tax Ordinance, 1979 and the monthly deposits and end receipts declared as |Pension' exempt from tax.

- Deposit Scheme should be availed for purposes of securing pensions for individuals.

Nizar Mecklai

- Principles should be espoused and support to vested interests should be avoided.

- Personal tax should be abolished

- SLAB taxing should be discontinued.

- Indirect taxes should be introduced.

- Inflation should be considered as constitutionally established level of taxation through control of money supply, taking in consideration the overwhelming level of corruption.

- Mechanisation reiquires mono-culture and therefore reduces variety and increases hazard of fertilizer/pesticide pollution so apparent in the developed World, and genetic destruction.

- Dispersed locations of output are strategically required for our security and to spread employment away from existing cities which are already crowded beyond their capacities.

- Housing - considering our enormous back-log, building materials must be made more economic.

- Import Substitution - especially agriculture produce because it uses available cost-efficient resources of land, water, labour, traditional technology-should be supported.

- Exports through subsidies, in whatever form should be discouraged, as it only enables purchase of "depreciating" foreign currencies with which to purchase "inflating" overseas products. It would be cheaper for the people to devalue or subject our currency to a market value.

* Industries should be directed to construct 2 to 3 room bachelor hostels for upto 20 per cent of their labour force.

Pakistan Automobile

Corporation Ltd.

Income Tax Ordinance, 1979:

- Limit of perquisites undersection24(i) of the Income Tax Ordinance, 1979 should be raised from 50 per cent to 100 per cent.

- Withdrawal of investment allowance in cases where income exceeds Rs. 100,000 should be restored.

- Exemptions should be given for deductions under Sections 50(4) and 50(5) to those limited Companies who are liable to pay advance tax under Section 53 during the financial year in which the goods are purchased and imported.

- Limit for filing of Wealth tax statement under section 58(1) should be raised to Rs. 200,000 for all assessees.

- Salary class assessees should not be subjected to detailed scrutiny and total audit.

- Tax rate inclusive of surcharge and other levies should not exceed 40 per cent for any type of assessee.

- Agricultural income should be taxed in the same manner as the non-agricultural income.

- Depreciation rates should be specified for computers and other office equipments under a separate head in the third schedule to the Income Tax Ordinance.

- Industries set-up in Tax Holiday areas should be allowed to carry forward their losses, as allowed to companies which are not set up in Tax Holiday areas.

- Turnover tax should not be charged from companies enjoying Tax Holiday.

Income Tax Rules, 1982:

- Exemption limit of house rent allowance should be raised to 60 per cent of the basic salary.

- Exemption limit of conveyance allowance should be raised to 50 per cent.

Capital Value Tax:

- the capital value tax either be imposed on vehicles above 1000 cc or cars valuing above C&F Karachi (ITP) equivalent to Rs. 100,000.

- the condition of submission of Form B should be waived, particularly in case of a person paying Capital Value Tax.

- the clause 5(2) of Capital Value Tax Rules 1990 be deleted in toto and word manufacturer be deleted from clause 8(1) of Part III. Hence the Capital Value Tax may be collected at the time of registration.

Customs Act, Ruies & Procedures:

- The anomaly in tariff structure should be removed and for this purpose tariff structure for CKD vehicles must be such that the concessionary rate of duty is increased proportionately for vehicles with higher engine capacity as proposed below:
 CKD Import Duty on
Engine Upto above
Capacity 1300 cc 1300 cc
Cars 30% 60%
Pick-,up 5% 20%
Van3o% 60%
4x4 WD 30% 60%

- Concession in custom duty should be linked with deletion and the manufacturer achieving higher deletion percentage should get more benefit. Following tariff structure is proposed:

- Short/damaged/missing components of cars and light commercial vehicles (LCV) should be allowed to be imported under the same rate of duty as applicable on CKD consignments.

- Uniform rate of duty should be levied on entire plant as well as part thereof.

- 2.5% loading charges on deleted parts should be stopped immediately as it has deprived the advantage of deletion to the assemblers.

- S.No. 2 of SRO 496(1)/85 dated May 23, 1990 should be amended as follows: S.No Type of Vehicle (CKD) Rate of duty 2. a. Trucks and pick-ups with driver

cabin only Free

b. Motor cars, vans and Four wheel

drives (4x4) of engine capacity not

exceeding 1000 cc 15%

- The scope of concessions under SROs of November 18, 1990 as amended by SROs of March 26,1991 should be confined to Trucks/Pick-ups and delivery vans imported in CKD only.

Sales Tax:

- Sales tax should be rationalised and charged on duty paid value of CKD vehicles instead of sales value in line with CBU vehicles.

Pakistan Tobacco

Company Limited

- Tax credit for replacement, balancing and modernization of plant and machinery which was allowable under Section 107 of the Ordinance should be restored.

- Minimum tax @0.5 per cent of turnover u/s 80D should be eliminated on tobacco companies as 80 per cent of their turnover comprises of government duties. For cigarette distributors the rate has been lowered to 0.1% but this relief is not allowed to tobacco companies.

- Rates of deduction of tax u/s 50(4) should be decreased for tobacco companies as 80 per cent of their sales price comprise of government duties and higher rates which results in tax deductions more than the amount of tax payable as per the return. Further the cost of production and sale price of products increases which results in an inflationary situation in the economy. Due to introduction of section 80C in the Ordinance, the tax deducted represents an additional cost to supplier who in turn transfers it to whom supplies are made.

- Class of assets concept in the third schedule to the Ordinance should be restored as its withdrawal resulted in laborious calculations in computing tax gain or loss on sale of any asset.

- Fair market value concept should be excluded from the transactions involving sale or lease back of assets as it is different from the normal sale, and lessor would normally buy the assets at a price lower than the market value to keep a security margin.

- Ceiling of Rs. 10,000 should be restored for deduction of tax at source from certain dividend payment u/s 50(6A), to make the investment in shares by small investors more lucrative.

Roche Pakistan Limited

- Requirement of submission of bank/ insurance guarantee for release of imported raw and packing materials of pharmaceutical industry on which custom duty and sales tax is payable should be substituted with submission of an Indemnity Bond as it is done in other specified engineering and electronic industries.

SAI Company

(Private) Limited

- Restriction imposed by Income Tax Ordinance on the quantum of salary and perquisites of directors in relation to Company's total income should be lifted.

State Life insurance


- Government of Pakistan introduced the National Accident and Death Insurance Scheme in July 1986 to provide adequate financial help and assistance to the family of a deceased. This scheme was implemented and managed by State Life under a contract, but unfortunately it was discontinued by the Government just after 3 years of its introduction i.e. in June 1989. It is strongly suggested that this scheme should be reintroduced in the current budget in order to fulfil the social and national objectives.


- Multiple incidence of excise on engineering products should be reduced.

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Title Annotation:Management Association of Pakistan proposal
Publication:Economic Review
Date:Apr 1, 1992
Previous Article:Budget 1992-93 - shape of things to come.
Next Article:Power demand projections now 8,400 megawatts.

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